Bitcoin is Becoming a Tool for Financial Inclusion in Africa

11/17/2017 10:03 am ET

Bitcoin is already achieving some popularity/notoriety (depending on who you ask) in the Western world. There's no denying the fact that the cryptocurrency has the potential to alter the course of history in the global economic and financial spheres. Investors on Wall Street buy Bitcoin because of its speculative potential, which has outperformed all other type of traditional assets. In 2016, Bitcoin rewarded investors with an addictive 120% price gain. In the year-to-date period alone, Bitcoin has rewarded investors with more than 590.7% price gains.

What many people in the West however don't know is that Bitcoin is fast rising as a means of exchange and store of value in developing economies. One of the key drivers of the fast-rising adoption of Bitcoin in developing economies is the fact that Bitcoin eliminates the need for third-party centralized authorities in financial transactions. Bitcoin is essentially a peer-to-peer payment solution that is tamper proof because it enhances transparency.

When people in Europe and America buy Bitcoin, they mostly purchase the cryptocurrency with a speculative mindset in the hopes that its value will increase and they will make a profit. When people in Africa, part of Asia and Latin America, buy Bitcoin – it is an existential move and price gains is usually the last thing on their minds. Folks in developing countries buy Bitcoin because it levels the playing field between the haves and the have-nots. They buy Bitcoin because it gives them a shot at a better life by providing a sense of control on their economic wellbeing.

Bitcoin is helping unbanked Nigerians enter the global market

Out of 180 million Nigerians, only 30.09 million people have bank accounts in Nigeria as at August 2017 because it simply hard for most people to fulfill the KYC requirements needed to open a bank account. Out of the 30 million people with bank accounts, about 98% of account holders have don't save up N60,000 ($166.90) in the full year because they don't have much faith the traditional banking system.

Now, Bitcoin is bridging the gap between Nigeria's underbanked and unbanked population by providing them with access to the global economic landscape. Paxful is one of the companies leading the charge to leverage Bitcoin as tool for financial inclusion in Nigeria and the rest of Africa. Founded in 2015, Paxful has grown to become a tool that makes the power of blockchain accessible to mainstream users.

Paxful simply offers people interested in Bitcoin an opportunity to buy the cryptocurrency in real time. The truly innovative feature of Paxful that endears it to most Nigerians is that it offers more than 300 ways to pay for Bitcoin. Nigerians, most of whom don't have access to bank accounts can now buy and pay for Bitcoin with gift cards, cash deposits, online transfers, debit cards, Western Union, and MoneyGram among others. Paxful notes that it does more than $10 million volume transactions a week in just iTunes Gift Cards from Nigeria to China alone. Interestingly, Nigeria has become Paxful #1 market ahead of the USA.

What exactly does Nigerians do with Bitcoin?

The big question you probably want to ask is "what exactly does Nigerian does with Bitcoin"? I want to believe that you are not one of the ignorant folks who believe that all Africans live in mud huts and spend their days hunting lions.

1. Access to global markets

Nigerians simply use Bitcoin to get access to economic opportunities beyond their borders. Bitcoin also serves as a powerful tool of economic protection for many Nigerians who have lost faith in the country's financial authorities.

The Nigerian economy is import-dependent – the Nigeria's total imports in 2016 was $30.3 billion, which gives a per capita import of $160 worth of product for each of Nigeria's 180 million people. In fact, economists note that " Nigerian imports represent over three-fifths (61.5%) of total global imports which totaled $16.473 trillion in 2016."

Despite Nigeria's huge dependence on imports, Nigerian banks have placed a $100 monthly limit on foreign transactions that can be done with debit/credit cards form Nigerian issued banks.

Paxful's platform however makes it easy for entrepreneurial Nigerians to skirt the $100 limit by getting gift cards, using the gift cards to buy Bitcoin, and then using the Bitcoin to purchase much-needed imports from foreign markets.

2. Tool for economic protection

The fact that there's an arbitrarily limit on how much Nigerians can spend on imports has in turned limit the volume of imports (supply) and increased the prices of the little imports that find their ways into Nigeria. It is not strange then, that Nigeria has an alarming inflation problem.

It is no longer news that Bitcoin is saving Venezuelans from hyperinflation—the Venezuelan Bolivar is practically worthless such that people weigh a pile of bank notes rather than could it when used for transactions.

Nigeria's inflation is not yet as worse as the situation in Venezuela but people in Nigeria are going through economic turmoil. The Nigerian currency, the Naira has devalued by 90% and the economic outlook remains gloomy because the political class is preparing for the next election campaign instead of trying to fix the country. Nigerian's are buying Bitcoin to try and protect themselves against this super inflation and the fact that the price of Bitcoin could hit $10,000 is just icing on the cake.

This post was published on the now-closed HuffPost Contributor platform. Contributors control their own work and posted freely to our site. If you need to flag this entry as abusive, send us an email.
CONVERSATIONS